Estate Planning Primer Follow-Up

While it occasionally happens in this fashion, estate planning ought not to be a death-bed exercise. Many people put off the drafting of a bonafide will, perhaps because of the unpleasant nature of the matter involved or perhaps because they are confused and undecided about how to distribute their earthly wealth. A 2006 research study by a Canadian mutual fund company observed some interesting stats on the lack of will preparation, including: 68% of estates with minor children, 40% of estates with advanced degrees and 31% of estates worth in excess of $500,000.

Before we address issues related to the legacy of financial wealth, I think it is important to think about one’s other legacies, particularly to one’s offspring. These ones require advance planning well before a will needs to be drafted… and they are of the “soft” variety and perhaps the most important.

First, from an early age, a parent’s stewardship in establishing good values is critically important, and “Do as I say, not as I do” doesn’t cut it. Second is a parent’s contribution to a child’s attitudes towards money. I believe that these values form between the ages of 10-15, and they can become quite entrenched values. The young generation of today has grown up in the deepest and widest (in the Western world, anyway) enjoyment of wealth in the history of this planet, and they are the third generation that has grown into this comfort. The baselines of entitlement to a certain lifestyle rise high and are almost sacrosanct. I continue to recommend that young people read “The Millionaire Next Door” by Stanley & Danko. This is not a how-to-get-rich-in-the-stock-market book, but instead looks at the other side of family finances – the spending side. You can read a review of this book in our Book Reviews section.

Estate planning is a process, not just a thing to get done. Most people define “estate planning” as getting their will done. For many people, this indeed may be sufficient; however, that will probably needs to be revisited and tweaked over a life time, and perhaps sometimes simply restarted from scratch.

Your will may require a rewrite when any of a series of events occur:

  • You add children, natural or adopted
  • Your children pre-decease you
  • Death of spouse or other beneficiaries
  • A beneficiary experiences financial difficulty or emigrates
  • You are approaching mental incapacity
  • Divorce
  • Marriage or remarriage
  • A significant asset is disposed while living
  • Your executor predeceases you or becomes mentally incompetent or emigrates

The diagram (below) provides a broad schematic of the ways to distribute your assets:

Asset Distribution

 

Ways to distribute your assets:
While alive or dead
or from inside or outside your will

 

You may give away assets while you are alive, either directly or with strings attached through a trust. On death, assets which transfer through your will incur provincial probate fees, while others do not if you designate a beneficiary whilst alive. You may create trusts in your will to serve particular purposes and these trusts may be long lived.

Examples of circumstances which may merit more complex estate planning include: having disabled children, having spendthrift beneficiaries, having no direct heirs, leaving under-age beneficiaries, carrying a large death tax on your estate, having non-resident beneficiaries or executors or leaving a surviving spouse with “yours-mine-and-ours” children.



Our annual Spring seminar event went well and was sold out. The topic was Estate Planning Primer: The Highs and Lows of Inter-generational Wealth Transfer. As you can see below in our Annual Survey summary, estate planning is everyone’s least favourite topic! That said, attendees benefitted way more than they anticipated, and the course was the highest rated in our last five years. Of course, we understand people’s lack of enthusiasm for the topic:

““I am too young! I don’t need an estate plan!”

“Doing an estate plan means facing one’s own demise “

“I don’t have a big enough estate to worry about planning “

“There are so many complicated issues. I don’t want to face them”

“It costs a lot of money to develop a plan”

If you didn’t attend, try this little primer questionnaire:

Is my will older than 10 years?

Has my life changed significantly since my last will draft?

Is my family complicated, including remarriages or advance gifting or lending to beneficiaries?

Do my affairs include significant family heirloom assets, like a cottage or family business?

Do my affairs include large unrealized capital gains?

I don’t understand the estate implications of designated beneficiary and joint tenancy

My financial advisors (accountants, planners and investment advisors) have not been brought into the loop on my estate planning

Are my beneficiaries unaware of what lies ahead for them?

Are my beneficiaries inadequately prepared to steward the wealth I will be passing to them?

If you answered “yes” to many of these questions, you need to resolve to make 2017 your “Year of the Estate Plan“. Identify the “no” answers above and commit to dealing with them. Visit the “Estate Planning” topic in the “Tax and Financial Planning” section of our website, or give us a call.

Our June 9th Blog post cited a local survey conducted by VanCity, which identified a significant disconnect of wealth transfer expectations between future inheritors and their parents. Indeed, the issues are diverse and multi-faceted, particularly here in Metro Vancouver and other major cities. Our belief and work in this area of intergenerational wealth transfer has been explored in our website material on Family Confab. We continue to espouse the active and deliberate Family involvement in addressing the root issues of having Family Wealth sustain across multiple generations into the future. We also continue to espouse the importance of the “Cycle of the Gift” as explained by James Hughes in his book of that same title. We gave away several dozen copies of his book at the seminar, and have more copies here at the office.

Our quadrennial survey enquired about the importance to your financial well-being derived from the various divisions within our financial services. The rank order of deeming each aspect to be “very important” was as follows:

Investment management 95%
Tax management 91%
Investment strategy 85%
Financial planning 76%
Estate planning 50%

 

Updated June 2017